VEBA Frequently Asked Questions
- What is a VEBA and what are the tax objectives of the Plan?
- Why should I participate in the VEBA-MEP?
- Can annual sick leave cash-out be contributed to the VEBA-MEP?
- Do VEBA contributions reduce my State of Washington pension benefits?
- When and how do I get money out of my VEBA-MEP?
- Can the cost of any qualified retiree medical plan be paid from my VEBA-MEP?
- What happens if I die before my VEBA-MEP is used up?
- Who is the VEBA Plan Administrator?
- Who is responsible for developing and managing this Plan?
- What are the Trustee’s responsibilities?
- Will I receive a statement of my account?
- Will my account grow?
- How is the VEBA money invested?
- How are expenses paid?
- I am grandfathered in to the 180-day med plan. Why do I get to vote on VEBA?
- Why can’t people decide if they want to participate individually in the VEBA plan, instead of forcing everyone into the plan?
- Is it a huge hassle to request reimbursement?
- Can employees contribute additional money to their VEBA account?
- Is there a maximum allowed cash-out?
- If I am a member of the State’s retirement plan (PERS, TRS, LEOFF) will the cash out value be added to my annual income?
A VEBA is a tax-exempt trust authorized by the Internal Revenue Code Section 501(c)(9). The tax objectives of this type of plan are to enable your employer to make tax-free deposits on your behalf to the Plan, for your account to be credited with tax-free investment earnings, and to enable you to obtain tax-free reimbursements for your medical expenses and insurance premiums payments. VEBA-MEP contributions will not be reported on your W-2.
The VEBA-MEP account provides a source of funds to pay for the cost of health care expenses for you, your spouse, and your qualified dependents. A VEBA-MEP account may be used to pay any qualified post-retirement medical, dental, or vision out-of-pocket expenses (deductibles, co-payments, co-insurance, etc.), plus post-retirement medical, dental, or vision insurance premiums, Medicare Part B premiums, Medicare deductibles, Medicare Supplement Plans, and long term care insurance premiums.
When you retire, the total amount equivalent to your sick leave cash-out, based on your salary at the time of retirement, will be contributed to your VEBA-MEP account. Your cash-out amount is calculated at ¼ of your accumulated unused sick leave balance.
No. State law does not provide the authority for annual January cash-out funds to be contributed to VEBA-MEP. However, you may choose to not cash-out your unused sick leave annually, and instead accumulate more sick leave days which will increase your retirement cash-out amount.
No. VEBA contributions do not reduce the wage base reported to the Department of Retirement Systems which is used to calculate your pension.
Your VEBA-MEP is opened when your Employer sends sick leave cash-out funds to the VEBA Plan Administrator. You will be mailed a Welcome Packet and then you may submit a VEBA Medical Claim Form for your qualified out-of-pocket medical, dental or vision expenses incurred by yourself, your spouse, and/or your qualified dependents. Claims payment is efficient and hassle free.
You may file claims for any amount. Benefits will be paid until your account is used up. You may also arrange to have monthly insurance premiums paid by using the VEBA Systematic Payment Form. If your spouse or dependents are covered by different medical plans, their insurance premiums can also be paid out of this account.
Yes. The cost of any qualified medical plan you elect to use after retirement can be paid out of this account, including PEBB plans, Medicare Supplement Plans, etc. If you join the PEBB Retiree Medical Plan, you can authorize the Department of Retirement Systems to deduct your medical premium from your defined benefit pension check (PERS/TRS retirement plan members). You can then arrange with the VEBA Plan Administrator to directly reimburse you from your VEBA account by using the VEBA Systematic Payment Form. Direct deposit is available.
If you are survived by a spouse or dependent children (or other dependents as defined by the IRS) they may submit requests for medical expense reimbursements until your account is used up. If you have no eligible dependent(s), the funds remaining in your account will be paid as medical expense reimbursements to the heir(s) of your estate.
Rehn & Associates in Spokane is the VEBA Administrator. Rehn is an experienced employee benefits administrator specializing in the administration of ERISA health and welfare plans. Rehn provides all correspondence, accounting, and benefit payment services.
The VEBA Trust was developed and sponsored by the Association of Washington School Principals (AWSP), Washington Association of School Administrators (WASA), and the Washington Association of School Business Officials (WASBO). It is managed by six Trustees appointed by the sponsoring organizations. Over 25,000 employees have participated in the VEBA Trust since its inception in 1984.
The Trustees are fiduciaries and have a duty to act prudently and in the best interest of all the Plan participants and beneficiaries.
You will receive a semi-annual statement detailing all activity in your account. You may also call and request additional statements at any time.
The net investment earnings or losses (after expenses are deducted) are credited tax-free to your account on a monthly basis.
The Trust offers you three fund options. You may choose to have all or a portion of your VEBA account in any or all of the following funds:
· Stable Value Fund
· Balanced Fund
· Growth Fund
Investments in the Balanced and Growth Funds will fluctuate in value. VEBA is not meant to be a long term investment account. Its purpose is to hold funds that are distributed for medical expenses; hence the higher administration fee.
All expenses of administering the Plan are paid by reductions of investment earnings, or, if there are no earnings, charged as a deduction to a participant’s account.
As an employee grandfathered into the 180-day med plan you have a vote regarding VEBA because every year you may elect to switch over to the accrual method. Although the 180-day med plan is NOT cashable, if you were to switch over to the accrual method, your previous hours, plus any new accruals would be cashable and part of the VEBA plan. This decision can be made any year (only once) up until retirement.
Why can’t people decide if they want to participate individually in the VEBA plan, instead of forcing everyone into the plan?
The "all or none" comes from IRS rules. VEBA Medical Expense Plans were created by the governing bodies, but they must comply with tax laws. The IRS very clearly states that if you give employees the choice of receiving cash or having a benefit, then that benefit/cash must be taxable as income. The only way to protect the tax status of the VEBA account is to make it such that employees don't have the option and/or choice to receive cash. Therefore, we can create a VEBA MEP, and allow people to vote participation in (or out), but once it's voted in, all employees must participate. In other words, you cannot provide a tax free benefit without making everyone participate.
The whole benefit of the VEBA-MEP is the tax protection. In the past, if you were to retire from the University, you could cash out your sick leave, but it would be taxed at 25%. So, you lose 25% of the 25% cash out. The VEBA MEP accounts were created, because it was presumed that the majority of people who were retiring from the University would have some sort of health care costs during their retirement years. Specifically, costs associated with premiums for retiree health care coverage and/or Medicare, or costs associated with keeping themselves healthy in old age. This tax protection would allow people 25% more money to spend on what is pretty much a guaranteed need.
Similar to the FSA (Flexible Savings Account), you must fill out a reimbursement form, along with appropriate documentation. If there is a question about the documentation or medical necessity, there may be additional steps. For the majority of claims the process is very simple. There is also an option to set up automatic premium payment from your VEBA-MEP for regular medical expenses such as your Retiree health insurance premiums. That way, the VEBA administrator automatically sends payment to the WA State Health Care Authority for your retiree medical premiums.
No. Additional contributions are not allowed at this time. However, congress is considering legislation that would allow for the creation of a Health Savings Account. This account would be similar to the University’s Flexible Savings Account or a Personal IRA. It would allow taxpayers to put aside money on a tax free basis to cover health care related expenses. This is something to watch for in the future.
No, whatever your sick leave balance is, it will be cashed out at 25% upon retirement.
If I am a member of the State’s retirement plan (PERS, TRS, LEOFF) will the cash out value be added to my annual income?
The cash out value of sick leave is not added to your W-2 income or applied to your retirement.